Why Ontario's cannabis retail lottery winners seem familiar

AGCO rules allow multiple individuals to use the same address on different applications

AGCO rules now require applicants to secure a retail space in order to qualify to enter the lottery.Juan Cristobal Cobo/Bloomberg

Multiple addresses associated with one legal cannabis retailer based in Sudbury, Ont. appear to have won big during the second round of Ontario’s cannabis retail lottery, winning seven of the 42 draws that guarantee eligibility to apply for a licence to operate a store.

More than 100 individuals used 14 addresses linked to HighLife Cannabis Co. to submit over 650 applications to the Alcohol and Gaming Commission of Ontario (AGCO), the regulatory body overseeing the province’s cannabis retail rollout.

Seven of those applications were successful and covered almost all regions of the province except the north, where HighLife already operates a legal cannabis store.

Anton Lucic, who also won in the first round of the lottery earlier this year, owns HighLife, one of two legal cannabis stores already operating in Sudbury.

AGCO rules allow for multiple individuals to use the same address on different applications, even though a higher number of submissions for a single location increases the likelihood of a win.

“There is nothing that prevents a property from providing more than one applicant an opportunity to secure their retail space if they were selected in the lottery,” said AGCO spokesperson Ray Kahnert.

A now-defunct section of HighLife’s website indicated the retailer was planning to open 15 new stores at different addresses across the province. All the addresses but one were used on lottery applications. The section of the website listing upcoming locations existed until Wednesday evening, after which the same link led to a “404 — not found” error.

For example, “Highlife – Oshawa” was listed as an upcoming branch, located at 20 Simcoe St. S. According to data provided by the AGCO, that specific Oshawa address had 143 submissions, two of which won.

Unlike the first lottery round, AGCO rules now require applicants to secure a retail space in order to qualify to enter the lottery.

An address in Barrie, Ont. — 65 Collier St. — which HighLife advertised as an upcoming pot shop location was used on 91 different applications. Sofia Kuliev, who is associated with that address, emerged as a lottery winner.

Another example of bulk lottery entries was an address in Toronto — 1295 Finch Ave. W. — which had 96 associated submissions, and ended up being on a lottery wait list for the Toronto region. A cannabis retail store called “HighLife – Finch” was listed on HighLife’s website at that same address.

The other Highlife-linked winning addresses were 213 Queen St. E. in Toronto, 120 Wyndham St. N. in Guelph, Ont., 115 Division St. in Welland, Ont., and 8685 Lundy’s Lane in the Niagara region.

It is unclear whether HighLife owns any of those locations. The company did not respond to a request for clarification.

“If we assume that HighLife owns these locations, which we don’t know, it is possible that they created a service agreement whereby they would provide the real estate to the applicant, if the applicant won,” said Toronto-based cannabis lawyer Harrison Jordan.

“If I was a landlord and I wanted to make a mountain of money, I would have agreements with as many prospective tenants as possible. As long as you don’t control the applicants, there is nothing that says you cannot provide your locations to those who want to take part in the lottery.”

I can tell you, based on the first round, substance over form is what the AGCO is looking for

Cannabis lawyer Trina Fraser of Brazeau Seller Law

Cannabis lawyer Trina Fraser of Brazeau Seller Law said a key factor in determining if the addresses associated with HighLife will be allowed to continue in the lottery process is whether or not the individuals associated with those applications “acted in concert” with each other.

“It comes down to this notion of affiliation, which is not just black and white,” she said. “The AGCO will have to determine if someone had a degree of influence over an applicant or over multiple applicants.”

For example, Fraser said, if a company or individual was just tapping into their network, telling their friends and family to apply and lending them an address, that would not necessarily be a violation of AGCO rules.

“But if there’s a deal behind the scenes where a company says, ‘Look, we’ll provide you with our branding if you win,’ then you’re getting into sticky territory where you could be disqualified,” she said.

There were other block entrants in this round’s cannabis lottery. For example, three separate locations on Commerce Park Drive in Innisfil, Ont., submitted a total of 130 applications. Each of the three locations won.

There are currently 24 legal cannabis stores in operation in Ontario, 13 of them are in the Greater Toronto and Hamilton Area, and five of those are located in Toronto.

“I can tell you, based on the first round, substance over form is what the AGCO is looking for,” Fraser said. “They ultimately want to know do you really want to own and operate a cannabis store or are you in this to just cut some deal with someone else?”

Financial Post

vsubramaniam@postmedia.com

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